Brisbane CBD office vacancy rate hits 15.4% in Q2

It’s still higher than the 10-year quarterly average of 15.3%.

According to a JLL report, both Brisbane CBD and Near City markets recorded positive net absorption of 27,700 sqm and 2,800 sqm over 2Q22, respectively. 

“Large occupiers contributed significantly to net absorption in the CBD over the quarter, in part due to the completion of 80 Ann Street and the expansion of several occupiers into the new building.”

Here’s more from JLL:

Vacancy has increased in Brisbane CBD over the quarter to 15.4%, which can partially be attributed to the added office area from 80 Ann Street. In the Near City, vacancy has stayed effectively stable at 18.5%. Vacancy remains significantly higher than the 10-year quarterly average of 15.3%.

Rising construction costs may pause future supply

80 Ann Street reached practical completion over the quarter, delivering 60,243 sqm of commercial space to the market. Seven projects remain under construction across the Brisbane metropolitan market, totalling 182,941 sqm. Three of these projects are in the CBD (totalling 108,834 sqm). The remaining four assets are located in the Near City (74,107 sqm).

The pipeline remains significant, despite continuously high vacancy rates. 664,500 sqm of the supply pipeline has plans approved, 73,700 sqm with plans submitted and 112,700 sqm with new stock proposed or on hold. The majority of this anticipated stock is located in the CBD (58%), with the balance in the Near City (42%).

The investment market slows down

Prime gross effective rents (PGER) rose by 1.7% over the quarter to AUD 399 per sqm per annum in the CBD. This is the second consecutive rise seen in rents since 1Q20. PGER marginally increased in the Near City, rising by 0.7% q-o-q to AUD 299 per sqm per annum. Both markets continue to report sticky incentives at 43%.

Both prime yield ranges across CBD and Near City submarkets remained stable over the quarter at 5.00-6.25% and 5.50-7.25%, respectively.

Outlook: Occupier activity anticipated to slow

While expansion has occurred over the quarter, particularly in the CBD, confidence has started to wane in the tenant market given the current economic climate. It is anticipated for tenant sentiment and the number of briefs in the market to decline going forward.

Landlords continue to aggressively drive increases to face rents, while incentives have remained sticky. A mismatch between landlord and tenant confidence may see landlords soften their approach to rental increases in the near term.

Note: Brisbane Office refers to Brisbane's CBD office market (all grades).